India and France have signed an Amending Protocol to update the Double Taxation Avoidance Convention DTAC between the two countries, aligning the tax treaty with international standards and strengthening economic cooperation.
The Protocol was signed during the recent visit of the President of France to India.
It was inked by Ravi Agrawal, Chairperson of the Central Board of Direct Taxes CBDT, on behalf of the Government of India, and Thierry Mathou, Ambassador of France to India, representing the French Republic.
The Amending Protocol grants full taxing rights on capital gains arising from the sale of shares to the jurisdiction where the company is resident.
The Amending Protocol also deletes the so-called Most-Favoured-Nation MFN Clause from the Protocol to the DTAC, thereby bringing to rest all issues relating to it, the Ministry of Finance said in a statement on Monday, 23 February.
The agreement revises the taxation of dividend income by replacing the earlier single rate of 10 per cent with a split structure – 5 per cent for shareholders holding at least 10 per cent of the capital of a company and 15 per cent for all other cases.
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The definition of Fees for Technical Services has been modified to align with the provisions contained in the India-US Double Taxation Avoidance Agreement.
In addition, the scope of Permanent Establishment has been expanded by adding Service Permanent Establishment.
The Protocol updates the provisions related to Exchange of Information and introduces a new Article on Assistance in Collection of Taxes, as per international standards.
This would enable and facilitate seamless exchange of information and strengthen mutual tax cooperation between India and France, according to the ministry.
The Amending Protocol also incorporates within the DTAC the applicable provisions of BEPS Multilateral Instrument MLI that had already become applicable consequent to the signing and ratification of MLI by India and France.
The changes under the Amending Protocol will come into effect after the completion of internal procedures under the laws of both India and France, and subject to the agreed terms.
The ministry said the Amending Protocol updates the India-France DTAC to the latest international standards in a manner that balances the interests of both India and France and updates it in accordance with international standards.
The Amending Protocol will provide greater tax certainty to taxpayers and boost flow of investment, technology and personnel between India and France, thereby strengthening the economic relationship between the two countries, the ministry added.
